Merrill Lynch & Co. Chief Executive Officer John Thain and two former Goldman Sachs Group Inc. colleagues he recruited may reap almost $200 million for their year running Merrill if they leave or are given lesser roles after Charlotte-based Bank of America Corp. buys the brokerage.
Thain, who got a $15 million bonus when hired in December, stands to get an additional $11 million in accelerated stock payouts if he doesn't stay after the deal, compensation consultant Graef Crystal said. Trading chief Thomas Montag, who joined in August, may get $76 million including bonus and accelerated awards. Strategy head Peter Kraus was given $95 million including bonus and stock awards to replace a Goldman package he had to forfeit, people familiar with the matter said.
While Thain managed to negotiate a merger even as rival Lehman Brothers Holdings Inc. sank into bankruptcy, shareholders may resent the executive payouts. Merrill's stock returned more than 13 percent a year from 2000 through 2006. Since Dec. 1 of last year, Thain's first day, the shares have fallen more than 60 percent, as writedowns on devalued mortgage holdings eroded the company's financial results.
“Investors will definitely be disappointed,” said Richard Bove, an analyst at Ladenburg Thalmann & Co. “Thain's claim to fame here is that he kept them from going bankrupt.”
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Merrill spokesman William Halldin declined to comment.
Under terms of the deal announced yesterday by Bank of America, each Merrill share will be exchanged for 0.8595 shares of Bank of America stock. Based on Bank of America's stock price of $33.74 on Sept. 12, that works out to about $29 a share.